Industrial production was down 0.2pc compared with June according to the Office for National Statistics, as oil and gas extraction was held back by extended North Sea maintenance work.

Economists had expected a modest rise of 0.2pc.

"This undermines hopes that industrial production will see a decent rebound in the third quarter after plunging by 1.6pc in the second quarter when it was held back by a number of special factors," said Howard Archer, chief UK economist at IHS Global Insight.

The UK manufacturing sector - which strips out mining, quarrying and utilities - fared slightly better but remained weak, with output rising 0.1pc between June and July. Economists had predicted no change.

"The recent marked loss of momentum in manufacturing activity has been particularly disappointing. While manufacturing only accounts for 12.8pc of GDP, it was very much the bright spot of the economy in 2010 and early 2011," Mr Archer said.

There was more downbeat news from the housing sector, as Halifax reported a 1.2pc fall in prices in August.

Sliding momentum in the industrial sector, as well as a raft of poor data from the broader economy and fears over the health of the eurozone and US economies has fuelled the debate over whether the Bank of England should inject a fresh stimulus through its quantitative easing (QE) programme.

Chris Williams, chief economist at Markit, said that the latest data would add weight to the calls for further QE from those members of the Bank's Monetary Policy Committee (MPC) who tend to favour looser policy conditions.

"There is an increasing chance that the Bank may ease policy as soon as the October meeting, though it seems more likely that the MPC will wait until updated forecasts are available in the November Inflation Report," he said.

The MPC is expected to hold interests at 0.5pc when it announces its latest policy decision tomorrow at noon.

The Chancellor George Osborne was forced to admit last night that Britain's growth prospects have worsened.

He said that while "we have all had to revise down our short term expectations over recent weeks," the Government was right to press ahead with its austerity plan because it was the only chance of a sustainable recovery.